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Russian role in Opel rescue could be politically risky for Merkel

Chancellor Angela Merkel's decision to support a Kremlin-backed rescue of Opel with taxpayers' money may come back to haunt her, and could fail to prevent Opel crashing and burning further down the road, experts say.

Russian role in Opel rescue could be politically risky for Merkel
Photo: DPA

“All this seems to rest on a very fragile base. Let’s say there is a 60 or 70 percent chance that it won’t work,” Juergen Pieper, an automotive analyst at Metzler Bank, told AFP.

In a mammoth effort over recent months climaxing in a frenzy of activity last week, the German government agreed in the early hours of Saturday morning to back a takeover of Opel by a consortium formed around Canada’s Magna.

Under the deal, GM would keep 35 percent of the company and Opel’s workers would retain 10 percent. Magna, which makes auto parts, would hold a 20 percent stake and state-owned Russian lender Sberbank 35 percent.

Government sources told AFP that Germany would act as guarantor for around €3 billion ($4.2 billion) worth of loans, and the government would also itself make an emergency loan of €1.5 billion euros to Opel.

Magna meanwhile, which until recently was relatively unknown outside the auto industry, has pledged to cough up €300 million to keep the cash-starved Opel alive in the coming weeks.

The Canadian firm, which thrashed out an eleventh-hour agreement with GM executives in a luxury Berlin hotel on Friday, has pledged to keep all Opel’s German factories open and limit job cuts there to around 2,500.

But across Europe as a whole, where GM employs some 50,000 people including 7,000 in Spain and 4,700 at Britain’s Vauxhall, the picture may be less rosy with Magna saying it plans to lay off one in five workers.

Last week Germany came under pressure from Britain and Belgium not to save German jobs at the expense of workers elsewhere, and on Saturday Britain’s biggest trade union Unite voiced concern about the fate of Vauxhall workers.

It was also unclear whether Magna’s intention to start making Opel cars at a factory in Russia owned by precious metals tycoon Oleg Deripaska’s GAZ automaker would mean some production will be taken away from plants in the European Union.

Russian involvement also raises eyebrows because it strengthens the already strong business ties — most notably in gas — between Berlin and Moscow. Critics say that these ties make Germany too soft on the Kremlin.

For analysts, it was September’s elections in Germany that helped win Merkel over to Russian involvement.

“Money doesn’t smell at election time,” said Andrew Wilson at the European Council of Foreign Relations think tank.

Magna and its Russian backers have their work cut out making the deal work, with Opel part of a global automotive industry that was already facing huge challenges even before the world economy hit the skids last year.

Frank Schwope, an analyst at Germany’s NordLB bank, predicted that the Canadian-Russian investors “will try everything, and then fail and Opel will be insolvent in two or three years.”

Magna also has very little experience making cars — unlike Fiat, which also wanted to snap up Opel but then got cold feet — and the financial details of the deal are unclear.

Merkel admitted on Saturday that the road ahead is a rocky one.

“For Opel and Magna, the work is now just beginning and there are several difficulties still to overcome,” she said.

But cynics say that for the chancellor and her partners in the governing coalition, even if Opel does end up collapsing further down the road, it is mission accomplished: Opel will not be issue in September’s vote.

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MONEY

What to know about investing in cryptocurrency in Germany

Germany has been dubbed the most crypto-friendly country in the world. We break down why that is, and what you should know about cryptocurrency in Germany.

What to know about investing in cryptocurrency in Germany

As with all of our financial and tax summaries, this is a guide on regulations only. For financial advice which is personalised to your situation, please contact an accountant or other specialist. Please note also that EU financial regulators have warned that many crypto-assets are highly risky and speculative. Find out more information here.

At first glance, Germany seems an odd place to be a cryptocurrency haven. Only 17 percent of people in Germany invest – way behind the percentages seen in other countries – which may go some way towards justifying the country’s reputation as a land of risk-averse savers.

Cryptocurrency, often called crypto for short, is considered by many investment analysts to be one of the riskiest and most volatile investments a person can own.

Concerns have also been raised over the environmental impact of cryptocurrencies.

There are countless types of crypto on the market these days. What each one has in common is that it is digital and secured using cryptography, meaning they can’t be counterfeited. 

Even the three biggest and most well-known cryptocurrencies – Bitcoin, Ethereum, and Ripple – are prone to huge sudden spikes and falls in value. It’s also a market that has seen some, like the LUNA cryptocurrency last month, crash completely.

Yet, bucking national stereotypes, Germany has some of the most favourable laws in the world for investing in these high-risk assets.

READ ALSO: What you should know about investing in Germany

Germany’s crypto tax advantages

Crypto exchange comparison site Coincub recently named Germany as the world’s most crypto-friendly country, with Singapore and the United States rounding out the top three.

A big reason for this comes down to favourable tax laws. Normally, when someone in Germany sells a regular stock or ETF asset at a higher price than they bought it for, their brokerage will automatically withhold 25 percent of their gain in tax.

Euro notes bitcoin coins

Euro notes and bitcoin coins on a laptop. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

But following tax guidance issued by the Federal Ministry of Finance last month, certain gains in cryptocurrency could face absolutely no taxation at all.

Firstly, the ministry has affirmed that any profit of less than €600 faces no tax. More significantly though, cryptocurrency that someone in Germany has held for at least a year faces no tax at all – no matter how big the gain is when that person sells it.

Why is the law so favourable in Germany?

One variable is political. The liberal Free Democrats tend to attract a sizeable number of votes from the very demographics more likely to hold crypto. While the FDP is in a three-way coalition with the progressive Social Democrats (SPD) and the Greens, FDP leader Christian Lindner currently holds the German Finance Ministry.

During the 2021 election campaign, Lindner made regulating and attracting crypto investment a big part of the FDP platform and coalition negotiations.

“I think the German government understands how to make money better than a lot of other countries,” says the man behind crypto Youtuber The Modern Investor, a channel with over 225,000 subscribers.

“A lot of people in the crypto space are very internationally mobile,” he tells The Local. “If they choose to live in Germany for the favourable investing conditions, they’re going to be spending money in German supermarkets and buying German services. The money the government misses out on in taxes tends to go right back in the system.”

“If cryptocurrencies continue to take off globally, Germany will eventually be seen as a genius for figuring out how to attract this money and keep it within its borders,” he adds.

Germany’s crypto niche to go mainstream?

Cryptocurrency is still a niche investment in Germany. While only 17 percent of Germans own stocks, only about 2.6 percent own cryptocurrency.

German crypto investors typically skew younger, with a third of all German crypto investors being 34-years-old or younger. The more a person makes, the more likely they are to hold crypto as well, with two-thirds of all German crypto investors earning €800,000 a year or more.

That narrow niche is still big within the crypto community itself though. Around nine percent of the world’s Bitcoin nodes – the computers that run the secure list of transactions using that currency on a digital ledger known as the blockchain – are in Germany, and 14 percent of Ethereum nodes, another major cryptocurrency. That’s second only to the US.

Cryptocurrencies

A tablet screen displays the value of various cryptocurrencies in the Coinbase app. Photo: picture alliance/dpa | Fabian Sommer

Yet, while German ownership is still small, the community is visible enough to make others curious. That goes for even the traditionally risk-averse savings banks, or Sparkassen – where many Germans park their savings. The Savings Bank Association says around 10 percent of its regular customers already hold cryptocurrency, leading them to start offering customers the chance to invest in a crypto wallet directly from their checking accounts.

Many of the online brokerages popular with Germany-based investors, such as Trade Republic, Scalable, and DKB, also offer cryptocurrency wallets alongside their options to buy more traditional products like stocks and ETFs. Using their smartphone apps, crypto can typically be bought and sold with a few short clicks.

READ ALSO: How to protect your savings against inflation in Germany

The Modern Investor says that’s part of a culture that’s increasingly viewing crypto as just another normal part of the investing landscape. While crypto suspicion is still high globally, Germany has simply chosen to accept that crypto is here to stay, and has decided to benefit from it. 

“Germany has been one of the very few countries that have actually put forth cryptocurrency regulations. So a lot of internationally mobile investors have run to Germany as a bit of safe option,” the Youtuber says.

“Many countries don’t have any regulations at all. That makes things even less predictable. What happens to a crypto investor in the US or China if either of those countries simply ban it tomorrow? With Germany, people know that’s simply not going to happen now.”

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